Iran Is Trying to Choke Off Traffic in the Strait of Hormuz

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0:33Jared Malsin:Inflation held steady in February, but the bigger question is what comes next? Plus, why the U.S. military isn't helping oil tankers get through the Strait of Hormuz.

0:44Spencer Jakab:What American defense officials are looking at is saying, like, if we send our people in there, they're going to be in the line of fire themselves. It's not safe for them either. So that's why they're not currently offering that to the oil or shipping industries.

0:57Jared Malsin:And Democrats are pitching tax cuts for millions of Americans to try to win over voters. It's Wednesday, March 11th. I'm Alex Osalev for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

1:18Jared Malsin:A new report out today from the Labor Department showed that consumer prices rose 2.4 percent in February from a year earlier. That's the same pace as in January and pretty much what economists expected. But these numbers are from before the U.S. and Israel attacked Iran, and the war threatens to raise a lot of prices. WSJ investing columnist Spencer Jacob joins us now to discuss the question on everyone's mind. Just what can February's numbers tell us? Spencer, under normal circumstances, these numbers would have been a key reading on what prices are doing. How does the Middle East war change that?

1:52Spencer Jakab:Well, yes, it changes it a lot. It's a bit like saying, you know, other than that, how did you like to play Mrs. Lincoln? I mean, there's a big, big thing that's happened since these numbers were compiled for February. This war, if it lasts a long time, will have an impact not just on energy prices, but on food prices because it affects a lot of the world's fertilizer supply, a lot of just transport generally in the world. What does the Fed do when you have a big energy price shock? Well, they're kind of scarred by the memories of the 1970s when they tried to initially cut the economy back into health, which turned out to be a mistake.

2:30Spencer Jakab:And really, the answer central bankers have for this is to do nothing. You know, unless there's a very severe recession or the war creates other recessionary effects, they tend not to try to use monetary policy to deal with a commodity price shock.

2:46Jared Malsin:So as the conflict continues, what are some of the numbers that you're going to be keeping an eye on just to gauge a bit of the economic impact?

2:55Spencer Jakab:One thing to look at is what's happening in the real world to prices. For example, gasoline prices, those are already up substantially. And those have a big effect, especially on middle and working class households, you know, spend a lot of money on gasoline in the United States. But also psychologically, it's a price that everyone knows. It's a price everyone sees. if the price of milk and bread and things like that start to go up as well, which they could. Those are the ones that people get angry about and are aware of, and it affects their behavior in other ways. It affects their propensity to spend, for example.

3:27Jared Malsin:That was WSJ Investing columnist Spencer Jacob. Thanks, Spencer.

3:31Spencer Jakab:Thank you.

3:35Jared Malsin:This morning, we told you the International Energy Agency was proposing a record release of oil reserves to try to bring down crude prices. The IEA has now agreed to do so, and its member countries will release 400 million barrels of oil from emergency stockpiles.

3:50Spencer Jakab:This is a major action aiming to alleviate the immediate impacts of the disruption in markets. But to be clear, the most important thing for a return to stable flows of oil and gas is the resumption of transit through the state of Hormuz.

4:12Jared Malsin:That was the IEA's executive director, Fatih Birol, speaking this morning. Meanwhile, the Strait of Hormuz, that critical shipping lane for the world's oil supply, is still effectively closed. Today, three commercial ships were hit around the Strait. The spokesman for Iran's armed forces said the country wouldn't let, quote, a single liter of oil pass through the Strait for the benefit of the U.S. and its allies. President Trump said today that oil companies should use the Strait. However, they're not likely to do so until it's safe. I'm joined now by WSJ Middle East correspondent Jared Malson.

4:46Jared Malsin:Jared, the president suggested that there will be military escorts to help ships cross the strait, but the journal's reporting that the U.S. military has turned down requests to escort ships through the strait. Why is that?

4:58Spencer Jakab:So the administration wants to calm the oil markets down. They're under a lot of pressure to do that right now because of the surge in oil prices. So the Trump administration has said it is prepared to offer military escorts for ships if necessary and when the conditions are right. The conditional phrases on that statement are very important here because what we understand from our reporting is that the Department of Defense and the military are not currently planning to escort any ships until it is safe to do that. The Iranians are attacking ships in the strait. And what we understand from our reporting from U.S.

5:40Spencer Jakab:officials is that they do not want to send the Navy in to escort any ships as long as that is still a very real risk. Iran still has the capability to strike using missiles, drones to mine the strait. It's just very dangerous for any ships to go through there.

5:58Jared Malsin:What are the conditions in the strait that make this so challenging?

6:01Spencer Jakab:So it's a very narrow strait. It's somewhere in the range of 24 miles wide, meaning the Iranian coast is very close by. And what one former Navy official told me is that when it comes to the missiles and drones that the Iranians could potentially fire, the U.S. or Allied Navy personnel that would be there would potentially only have seconds to respond to those. One of the analysts my colleague spoke to compared it to a kill box, essentially. And so what American defense officials are looking at is saying, like, if we send our people in there, they're going to be in the line of fire themselves.

6:38Spencer Jakab:It's not safe for them either. So that's why they're not currently offering that to the oil or shipping industries.

6:45Jared Malsin:What would it take to reopen the strait?

6:48Spencer Jakab:And what analysts have been telling me is that only a ceasefire, along with some kind of explicit assurances from the Iranians that they're going to stop shooting at these ships, that's the only thing that would really restore shipping through the strait.

7:02Jared Malsin:That was WSJ reporter Jared Moussen. Thanks, Jared.

7:06Spencer Jakab:Thank you.

7:07Jared Malsin:U.S. stocks were mixed today. Financial shares fell, putting pressure on the Dow, which dropped 0.6%. The S &P 500 ended slightly lower, while the Nasdaq ticked higher. Oil prices kept rising, with Brent crude, the global benchmark, closing up nearly 5 percent. We want to know how volatile energy prices are affecting you or your business. Let us know by sending a voice note to wnpod at wsj.com or leave us a voicemail at 212-416-4328. Make sure to include your full name and location so we can use your comments on the show. Coming up, everyone from Democratic lawmakers to McDonald's is trying to win over people watching their wallets.

7:48Jared Malsin:We'll get into how they're doing it after the break.

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8:31Jared Malsin:Democrats are out of power, and they're looking for ways to get the attention of voters who are worried about their finances. So senators are coming up with plans that would get rid of federal income taxes for millions of people. Maryland Senator Chris Van Hollen is preparing a proposal to end income taxes for people making under$46 ,000 and married couples making under$92 ,000. And New Jersey Senator Cory Booker's pitch would more than double the standard deduction while increasing the child and earned income tax credits. WSJ tax policy reporter Richard Rubin says the plans are an effort to win over voters.

9:06Spencer Jakab:What Senator Booker and Senator Van Hollen are doing is trying to address the concern that lots of voters have about the cost of living. And they see a tax cut as a quick, easy to understand way to do it. We shouldn't sort of underestimate the power of simplicity. We saw in the 2024 campaign how President Trump talked about no tax on this, no tax on that. It's a bumper sticker kind of thing. And that's really kind of what they're aiming to do is like this sort of mass big tax cut idea that's a little different from what we expect from Democrats.

9:38Jared Malsin:Rich says that the senators are trying not to increase the budget deficit, which is expected to grow in the coming years.

9:44Spencer Jakab:So both the Booker and Van Hollen plans, they're designed so that there are tax increases that go along with the tax cuts. Booker has talked about higher corporate taxes and raising the top tax rates. Van Hollen's got a surtax on very high income people. Their idea is to pay for the things that they're doing. The challenge is this. Any dollar that Democrats are able to raise in new revenue to pay for this is a dollar that they can't use for other initiatives. So these proposals have generated some pushback from others in the party who are like, well, wait a minute. What should be first on our list?

10:18Spencer Jakab:When Democrats get to 2029, their first chance to really be in control of everything again, what comes first for the party?

10:31Jared Malsin:Speaking of affordability, we're exclusively reporting that starting next month, McDonald's is planning to offer a new value menu of items costing$3 and less. It'll also have new$4 breakfast deals. The fast food chain has been pushing for nearly two years to cement its affordability image. And a shopper boycott against Target that has hurt its sales may be ending. Last year, a group of activists encouraged shoppers to boycott Target after it backed away from some of its DEI policies. Now their official work on the boycott will end. The activists say that's because Target privately acknowledged a breakdown in trust with the Black community.

11:08Jared Malsin:Target has reported 13 straight quarters of weak or falling quarterly sales. An executive said shoppers upset over DEI policy changes have played a role. A Target spokesman today said that the company is pleased to be moving forward. Last year, we reported a series about the boycott and its impact on Target's bottom line. We'll leave a link to that series in the show notes.

11:32Jared Malsin:The Journal has learned that the Trump administration is preparing to announce new tariff investigations over what it considers unfair trade practices. They could result in higher tariffs on a number of other countries. These tariffs are designed to replace the temporary 10 % tariff imposed last month after the Supreme Court ruled that many of Trump's previous tariffs were illegal. And we're exclusively reporting that President Trump ordered the Justice Department to reverse course on defending the White House's sanctions against law firms. The Wall Street Journal reported earlier this month that the department was dropping its defense of executive orders that outlined punishments against specific law firms.

12:10Jared Malsin:People familiar with the matter say that Trump said he didn't sign off on that and expressed displeasure with Justice Department leadership. White House Press Secretary Caroline Levitt said the president had confidence in Attorney General Pam Bondi and Deputy Attorney General Todd Blanche. And that's what's news for this Wednesday afternoon. Today's show is produced by Pierre Bien-Aimé with supervising producer Tali Arbel. I'm Alex Osula for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

13:08Spencer Jakab:We'll see you next time. So put that fork down. Try the new wraps today in app or at order.sweetgreen.com. Available at participating locations only.